Residential property
27 Oct 2017 News

The Death Knell for Strategic Transport and Infrastructure Funds?

Last year the Court of Session (in the case of Elsick Development Co Ltd v Aberdeen City and Shire Strategic Development Planning Authority, [2016] CSIH 28) decided that the Strategic Development Fund that had been put in place by Aberdeen City and Shire Strategic Development Planning Authority, which required developers to pay contributions into a central fund to be used towards strategic transport infrastructure across a wide area, was unlawful.

On 25 October 2017 the Supreme Court upheld that decision (in the case of Aberdeen City and Shire Strategic Development Planning Authority v Elsick Development Co Ltd, [2017] UKSC 66) in what is an important decision for developers across Scotland.

The Supreme Court has made it clear that whilst a planning obligation requiring the payment of developer contributions towards certain infrastructure necessitated by the cumulative effect of various developments will be lawful provided that the land subject to that obligation contributes to the cumulative effect, it is not lawful to impose planning obligations requiring developer contributions to be made which are unconnected to the development site. To do so would allow a planning authority to extract benefits which are unrelated to a proposed development.

In this case the Supplementary Planning Guidance required the pooling of payments to be used for strategic transport infrastructure across a wide area and these payments were not tied to a particular development. The Supreme Court decided this guidance was unlawful. Furthermore the Supreme Court decided that the planning obligation requiring the developer to pay such contributions had only a trivial connection to the development such that the planning obligation requiring the payment of the contributions was not being imposed for a purpose related to the development site as is required by Scottish planning legislation.

This decision appears to sound the death knell for any attempts by planning authorities to set up wider transport (or other infrastructure) funds to pool contributions to allow for more upfront investment in infrastructure. If so that creates a tension - it is accepted that there is a general need to improve infrastructure but as local authorities do not have funds available to do that and central government is subject to significant funding restraints, how can infrastructure that is needed to allow development to take place be provided? At the same time this opens the possibility of developers challenging the legitimacy and enforceability of Section 75 Agreements that seek to impose payment obligations in a pooled scenario.

The knock on effect of the Supreme Court’s decision is that one of the debates surrounding the forthcoming planning bill, due December 2017, will be about how strategic infrastructure is to be funded. The Scottish Government’s current preference appears to be a levy, similar to the Community Infrastructure Levy (“CIL”) in England and Wales. Many regard CIL’s implementation south of the border as a failure - so agreeing an effective method for Scotland is likely to be contentious.

If you would like to discuss the implications of this development or need more information please contact Isobell Reid or Colin Hamilton in our planning team.

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